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Executive Summary
The following study tends to discuss a strategic plan of management for Apple, Co. A prominent smartphone company. The discussion initiates with a transitory introduction of the company followed by the external drivers which influence the state of the company. Afterwards, the competitive environment of the company is discussed which is further justified by Michael Porter’s five forces. Afterwards, the internal analysis is conducted followed by VRIO analysis. Finally, on the basis of thorough discussion is done on company adequate recommendations along with the conclusion.
Introduction
Apple is renowned as an innovative company and a giant in the field of technology that has conveyed numerous ground-breaking gadgets to the market like iPad, iPod and MacBook (Ansoff, et al., 2019). Apple has made a noticeable comeback in recent years. Whereas the industry of computers has been witnessing a downfall in these years, Apple yet again, stated ascending the graphs to re-establish its market position. Along with elevating sales of smartphones, the MacBook sales of Apple have been equally increasing since MacBook Pros release. According to the reports of 2017, Apple has a net sale of 29 Billion, making Apple one of the worlds esteemed and prominent brand listed by Forbes (Ansoff, et al., 2019).
Drivers of Changes
A driver of change is either an external or internal factor that alters an organisation. The factors of change can include political, economic, social and technological factors. Such external factors can be calculated by using PEST analysis since it is a valued strategic approach for recognising the size, position, growth, viable operational methods, and classification of decline and development of a business (Wheelen, et al., 2017).
Apple is known as the marketing company having a digital asset and worldwide provider of smartphones. It is the company in its own league, which produces and executes both hardware and software. It permits the buyers to purchase and share application and other multimedia content through Apple devices, through the use of a platform of selling media known iTunes (Chang, 2016). Apple’s CEO (Tim Cook), in 2012, shared that the company is very enthusiastic because of the sales of the iPhone, which was approximately 12 million sales of iPad and almost 35 million iPhones. Furthermore, he stated that the new pioneering iPad will be soon released with innovative characteristics which can only be provided by Apple (Mathooko and Ogutu, 2015).
Furthermore, the sales of Mac, iPhones and iPad have ascended by 7% and 188%. In contrast, the sale of iPod descended by 15%. As compared to the number of Q1, 2012 the numbers of Q2, 2012 are considerably low as all the preceding records were smashed by apple as shown in the Figure below. Apple at that time sold about 15.43 million iPads, 5.2 million and 37.04 million iPhones (Zhao, et al., 2016).
The report of Q1 2012 revealed that in a rivalry with Samsung, Apple secured the 2nd place worldwide with a prominent growth of 8.8% of all the market of cell phone and 24.2% of the smartphone market globally. As shown in the table below (Rosenberg Hansen and Ferlie, 2016).
PEST Analysis
To recognise Apple’s operational directives, the potential of the business, and the situation of the future market, PEST analysis is used (Heracleous and Papachroni, 2016).
Political Factor
There are numerous issues that are unable to be regulated by Apple like; war against terrorism, geopolitical doubts, health issues, and working authority which can influence the global sale of Apple’s gadgets (Mathooko and Ogutu, 2015). In order to decrease the cost of operation Apple has subcontracted in various countries like China, the Czech Republic, Ireland, Korea and Cork. The likeness of Apple can be spoiled in the eye of dealers and purchasers, in the case of deferred manufactural operations (Rosenberg Hansen and Ferlie, 2016).
Economic Factor
The power of purchasing varies upon the economic state of the World. In light of the past few years, an increase in the rate of unemployment in numerous counties has affected the sales of products of Apple. An additional reason was increased in oil cost which surrounded the economy of the world with inflation (Chang, 2016). Due to the outcome of these factors, the power of people purchasing the product greatly reduced which impacted the Apple product’s sales because of the rushed prices. However, recently the economic state of the world along with the company is getting better and Apple has brought itself currencies that are foreign, making the revenue of Apple ascent in the market worldwide (Zhao, et al., 2016).
Social Factor
The 2 factors which have been on the front line of products of Apple during the course of their history are the quality and design (Wheelen, et al., 2017). Consumers are preferring to purchase the luxury gadgets and products because their power of purchasing has increased throughout the markets of the world and people are giving priority to the products of iPad, iPhones and iPad (Rosenberg Hansen and Ferlie, 2016). The industry of music is having a significant impact on the current generation. This factor also plays a part in ascending sales because of Apple’s high-quality music store iTunes. Consequently, Apple is currently an embodiment of modern and luxury lifestyle through social factors (Ansoff, et al., 2019).
Technological Factor
Apple is always at an advantage due to its enhanced technologies and unique innovative products. Apple invests its substantial sum in the field of development and research. For this reason, Apple is at number 1 ranking in the lists of innovative gadgets (Lockamy III, 2017).
Internal Factors
Strengths
- Apple’s chief strength is its unmovable position in the market and the loyalty of their consumers which gradually increases because of ‘Apple’s ecosystem’, which gives the company a head start in the competitive market. Secondly, Apple has a diversity of applications, software, and products which are interconnected and uphold each other. Thirdly, the release of iTV and other fresh products is expected to release soon (Zhao, et al., 2016).
- Apples resilient position in the market and the loyalty of customers are its main strong points. This is due to the unique and innovative ecosystem which Apple has created. This advanced invention of Apple enables it to be unbeatable in the market. However, this is not the only innovative product of Apple, moreover, it has a diversity of products and applications which are linked with each other (Chang, 2016).
- Apple has a streak of awards to its name, as the most renowned and prominent establishment in the world (Clarke and Boersma, 2017).
- At 2012’s ending, the cash which Apple held was $10 billion. Furthermore, the gross profit margin of Apple is significantly higher than its rivals and Apple has no debts.
- In 2012 apple was the second most valued brand of the world, having a value of $76.5 billion.
- Satisfaction of the customer is Apples top priority, the customers are in delivered top quality product awareness conveyed through trained and well-versed staff (Dolata, 2017).
Weaknesses
- The high price which Apple is offering is its main weakness because of the strong competitive market. Apple’s consumers can purchase a phone having the same specifications as Apple’s, at a significantly lower price (Lockamy III, 2017).
- The customers will be not be influenced enough if Apple is continuously decreasing the market shares. Furthermore, it will motivate the customers in not using Apple’s Ecosystem.
- Numerous companies around the world have accused Apple of defying their patent designs and furthermore, Apple was not able to defend itself against these accusations in court. Such scandals can decrease the status of Apple in the market (Hernández and Garcia 2018).
- Following the death of Steve Jobs, Tim Cook became the CEO of Apple, in 2012, which was the major and prevalent loss for Apple, Co. Afterwards, Scott Forstall and John Browett left the company as well resultantly putting an undesirable impact on the management (Rosenberg Hansen and Ferlie, 2016).
- The fact that in the tech market, the gross profit margin of Apple is unbeatable. However, because of the tough competition and increasing prices the company will not be able to keep its current margins (Lockamy III, 2017).
Competitive Environment
The fact that Apple is a huge industry having numerous products to its name is known globally. In terms of the smartphone industry and other products, Apple has the following main competitors: HP (Hewlett-Packard Company), Samsung, Nokia, BlackBerry and HTC. The following figure shows the competitors of Apple in the smartphone market and the gross profit margin, revenue, price earning, earning per share, and net income compared to its competitors (Castro, 2016).
Competitive Forces by Michael Porter
The following figure is about the Five Competitive Forces Theory given by Michael Porter. These forces define the competitiveness of any market industry. The following model aids in calculating the influence Apple has on its capability to compete with its rivals in the market (Clarke and Boersma, 2017).
Intensity of Rivalry
The intensity of the rivalry is the first force among five. This defines the concentration of the competition a company has with its rival. Apple has done wonders through conveying technical support, creating loyalty of customers, and production of products (Khan, et al., 2015). Hence, Apple is free from the fear of this factor because anything which is released by Apple is destined to be sold because of their strong groundwork. Moreover, this groundwork of Apple preserves its productivity without the need to produce superior products than rival tablets, Android phones and eReaders, who are selling their products at a low price (Clarke and Boersma, 2017).
Bargaining Power of Suppliers
The bargaining power of suppliers can reduce the profits of Apple by recognising supplies high prices. Therefore, the company is always on the lookout for fresh suppliers because the fact that Apple Company is continuously growing cannot be doubted (Zhou and Gupta, 2018). Fresh suppliers are allowed to get themselves registered on the website of Apple online, which in result convince the suppliers to reduce the bargaining power. Hence, Apple is able to reduce their bargaining power amidst a significant number of suppliers (Knott, 2015).
Bargaining Power of Buyers
In order to gain a majority of shares in the stock market, Apple has to take its consumers into consideration through a variety of segments like age, income and educational level (Khan, et al., 2015). Another factor is that the purchasers are quite sensitive in the measures of prices and can easily be distracted to another retailer. In the overall market of smartphone and tablet, Google is the leading competitor (Castro, 2016). This is due to that fact that Blackberry, which was once known as a leader of the smartphone market, now, only owns 1% of the market. Approximately 75$ of the industry’s profit is held by Apple (Zhou and Gupta, 2018). Hence, the chances of Apple users to switch to another brand are considerably low. However, Apple still has to be careful since companies like Nokia are slowly coming to ascension once again (Lai, et al., 2015).
Threat of New Entrants
Letting more companies enter the market clearly means that Apple will experience a decrease in its shares. Apple can generate profit and preserve its shares in the market through brand’s and product’s differentiation along with making a firm marketing strategy (Zhou and Gupta, 2018). A well-established company like Apple is not easy to compete by any company fresh in the market. The reason is quite vivid it is because Apple has esteemed imaging of brand, excellent customer services, perceived value, and most importantly the innovation (Clarke and Boersma, 2017).
Threat of Substitute Products
The threat of substitution of a product has two main factors, performance and price, which permits the customers to change the product. The substitution threat can be reduced and its percentage depends upon the loyalty of the consumer (Paik and Zhu, 2016). There is no company in the market which can offer the ‘ecosystem’ innovated by Apple. The main reason for the people to by iPhone is that they yearn for robust apps along with standards, furthermore, the other upgradability of Apple permits the customers to transfer content (Yusoff, 2018).
The sales of the companies have enhanced geographically, among this 1/3rd of the sales are from the US and 1/3rd are from Asia. Compared to Europe, having 22% of the market, these areas have a maximum expected growth in sales (Dolata, 2017). The market in Asia has significantly increased because Asia’s sales have upsurged twice the time since 2011. This suggests that the sales of the iPhone have increased by 85%. Furthermore, the growth of the iPad has ascended by 17%. This suggests a 132% increase in revenue. In contrast, the iPod and Mac were significantly low in sales as shown below (Yusoff, 2018).
Compared to its competitors like Google Android, shares of Apple have upsurged from 48% to 60% which far superior. The shares of Google have expanded from 15% to 19%. In general, the outcome was quite positive (Knott, 2015).
The level of equity had no effect on 45% of the high interest. Furthermore, without influencing it has augmented by 68% (Castro, 2016). The equity of the company may not ascend in future. It is due to the fact that the company has declared the repurchasing and dividend of the shares. The ratio of liquidity of Apple is 1:6, which is quite beneficial for the company and the excess money was $110,000,000,000 which has enhanced from $97,000,000,000 from Q4.
Conclusion and Recommendation
In short, The Apple, Co. is extremely innovative and the only company who took the innovation to a whole new level in contrast to the competing companies. These stances are usually considered to be significantly risky. However, Apple has been benefiting since the beginning when it comes to inventive products. Rigid and firm position in the market and unflinching loyalty of consumers have made Apple the tech-giant of the world. Furthermore, the closed ecosystem and various other user-friendly products have enabled Apple to stand apart from its competitors, having its own league. Apple is the most admired company in the whole world, which is an important factor. Whereas, it is also accredited to be the first business model having a sustainable music download system through iTunes and iPod. The fact that Apple is a lucrative company having expecting optimistic days, cannot be debated. However, the Apple should cautious in political and legal aspects which is due to the fact that in many countries Apple has a high price and it purchases the processor of application from Samsung, a fact which may give birth to problems.
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